Alaska deal aims to develop Point Thomson gas

Alaska Gov. Sean Parnell, left, and Natural Resources Commissioner Dan Sullivan appear at a news conference Friday, March 30, 2012, in Anchorage, Alaska, confirming that a settlement over disputes on leases in the Point Thomson gas fields had been reached with Exxon Mobil Corp., BP PLC and ConocoPhillips. (AP Photo/Mark Thiessen)

JUNEAU, Alaska (AP) — Alaska Gov. Sean Parnell said Friday that the state has reached a settlement in the long-running dispute over leases to develop the Point Thomson gas fields, clearing the way for progress on a major pipeline project.

Parnell had set a Saturday deadline for the major players on Alaska's North Slope to coalesce behind plans for a liquefied natural gas pipeline to get the region's resources to market.

He confirmed that a settlement was reached with companies including BP, Exxon Mobil and ConocoPhillips, which agreed to align with TransCanada Corp. so work toward a pipeline would be coordinated.

"Ending litigation and reaching alignment are important first steps," Parnell said, but he said additional work remains toward advancing the plans.

Exxon Mobil Corp., BP PLC and ConocoPhillips said they agreed on a plan to focus on a large-scale liquefied natural gas project, capable of overseas exports, as an alternative to a pipeline through Alberta, Canada, that would serve North America. This option could also align more closely with an effort to meet in-state gas needs, they said.

"This agreement does not guarantee a major gas line for Alaska, but it certainly moves us a significant step closer," said state Natural Resources Commissioner Dan Sullivan.

Parnell set expectations for progress on a major gas line in his State of the State address in January. The first step was to have resolution on the disputed leases at the Point Thomson gas fields by Feb. 8, the date the Alaska Supreme Court was to hear arguments in the long-running case.

The dispute erupted when the state began pulling leases it believes energy companies held for too long without developing. The Thomson Point leases are seen as critical to the fortunes of a gas pipeline, long-sought by Alaskans as a way to shore up revenues amid declining oil production, create jobs, and provide a reliable source of energy.

Parnell's second demand was to have Exxon Mobil, BP and ConocoPhillips align under an "Alaska Gasline Inducement Act framework" by the end of the first quarter. Such alignment was to include work on a large liquefied natural gas line through Alaska to tidewater that would allow for overseas exports.

Parnell said he expected the companies to have firmer numbers on a liquefied natural gas project by the end of September, and to identify a specific project and work schedule.

Completion of the first task — resolution on the Point Thomson leases — didn't come until this week. The settlement, which also includes Chevron Corp. and Leede Operating Co., mandates development plans.

Point Thomson, located 60 miles east of Prudhoe Bay, is Alaska's largest undeveloped oil and gas field, holding an estimated 8 trillion cubic feet of natural gas and hundreds of millions of barrels of oil and gas liquids, Parnell's office said.

The inducement act was passed under former Gov. Sarah Palin as a way to jumpstart a pipeline. TransCanada holds an exclusive license to advance a line under terms of the act and has been working with Exxon Mobil.

BP and ConocoPhillips, which balked at terms of the inducement act, pursued a rival project to the Lower 48, but that folded last year when it couldn't garner the commitments needed to move forward.

So far, TransCanada, too, has focused its efforts on a line that would serve North America markets. But changes over the last several years, including the rise of shale gas, have led to concerns that there will be little demand for Alaska gas in the continental U.S.

In October, Parnell called on Exxon Mobil, BP and ConocoPhillips to unite behind a project that allows for liquefied natural gas exports to the Pacific Rim if the gas market has truly shifted from the Lower 48. In January, he met with the companies' executives to discuss ways to advance a line.

Parnell said Friday that Alaskans should not miss the "historic significance" of the oil company CEOs coming together.

In a letter to Parnell, the CEOs of Exxon Mobil, ConocoPhillips and BP said they are looking at what it will take for a liquefied natural gas project — and to get gas off the North Slope to market — including a timeline and an assessment of major project elements, including global liquefied natural gas trends.

The CEOs said getting gas to market won't be easy, noting, among other things, that "unprecedented commitments of capital" for gas development by the companies will first require "competitive and stable fiscal terms" — meaning terms on taxes — from the state.

Parnell has said that if all the milestones he set out for a project are accomplished, the Legislature can take up the issue of gas taxes next year.